TransCanada Teams Up to Build Mexican Fuels Terminal

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Liberalization of Mexico’s energy laws helps to spur $800 million project; marine terminal to be built at Tuxpan

MEXICO CITY— TransCanada Corp. is joining forces with a Mexican oil-industry startup and a logistics company to build an $800-million fuel storage and transportation system in Mexico, taking advantage of new energy laws and the opening of the retail market there to further bolster its position in the country.

TransCanada, Sierra Oil & Gas and Grupo TMM will build a marine terminal at Tuxpan, in Mexico’s Gulf coast state of Veracruz, to offload and distribute refined products such as gasoline, diesel and jet fuel in central Mexico, the companies said Tuesday.

The project includes a 165-mile pipeline running inland from the terminal, and a storage and distribution hub in central Mexico. TransCanada will own half of the project, Sierra 40% and Grupo TMM, a transport and logistics company with operations at Tuxpan, 10%.

The development would be the largest single investment in refined products since Mexico overhauled its energy laws, the companies said.

In Mexico, infrastructure hasn’t kept up with the pace of the growth in demand for refined oil and gas products—particularly in the central region, Sierra Oil said in an emailed response to questions. “By increasing the efficiency, speed, and storage capacity for the importation and distribution of fuels, our project will have a positive impact in the fuels distribution chain.”

Construction is expected to start in the second quarter of 2017, with the marine terminal starting operations in the third quarter of 2018 and the pipeline and central market hub in the first quarter of 2019, the company added.

Constitutional changes in 2013 opened oil and gas exploration and production in Mexico to foreign and private companies for the first time in more than seven decades. Changes also ended state oil company Petróleos Mexicanos’ monopoly on the production and importation of gasoline, diesel and other fuels.

As of April, any company can import and sell gasoline in the country as Mexico moves toward a competitive fuels market. New laws also allow for the rebranding of service stations, which previously were all Pemex franchises.

Mexico consumes more than 800,000 barrels a day of gasoline, and more than half of that is imported.

TransCanada said the refined-products pipeline, with a capacity of 100,000 barrels a day, will be parallel to the Tuxpan-to-Tula natural-gas–pipeline project it was awarded last year.

The Canadian company also recently won a contract to build a $2.1 billion underwater natural-gaspipeline from South Texas to Tuxpan in partnership with Sempra Energy’s Mexican unit, Infraestructura Energética Nova SAB, and expects to be operating eight natural-gaspipelines in Mexico at the end of 2018, representing investment of about $5 billion.

Sierra Oil & Gas, formed in 2014, was the first private Mexican company to be awarded exploration blocks under the energy opening, winning two areas in the Gulf of Mexico last year in the first of the three auctions held so far.